Nifty Below 200 EMa: Inflation and geo Political Head winds take toll

Nifty is now trading below 200 EMA . Rising food inflation, Geo Political Tensions in Egypt resulted in negative sentiments. We see some more downside  till 5300-5400 levels with bouts of volatility in coming few days. Thereafter market participants will look for the union budget and how the Government plan to go ahead with reforms. Banking stock have corrected a lot and offer opportunity to buy at every decline.Though development in Egpyt may see rise in Crude oil prices and fear of third oil shock.

History Of Nifty Corrections

Nifty was able to close a tad higher above 200 EMA on Friday . readers of this blog may remember that as per the Chart History this correction to 200 EMA was on inevitable.
One can refer to our earlier post on this topic:
http://swingtradingideas.blogspot.com/2010/11/history-of-nifty-corrections.html

Rising food inflation,  Rising Interest rate , Fear of European debt crisis  will play for short term and many analyst will predict  a bear market and ask investors to stay away from this market. But just going by Chart History these  corrections to 200 EMA or even below it are common .
If we track history of Nifty Charts from 2003 : start of bull market then Nifty traded below 200 EMA in June 2004 , April 2005, June 2006 , July 2006 and March 2007  and after breaching these levels it bounced back above 200 EMA and resumed its uptrend. In the present scenario the same thing will happen at the worst Nifty may retest 5500-5550 . Nifty may form a base here , there is no Euphoria like we witnessed in January 2008 . Therefore, these corrections offer buying opportunities.

Jindal Poly : on the verge of breakout

Jindal Poly had very interesting pattern on charts . It is consolidating with narrow daily range and without retracing below 20 EMA. It has been trading in a range of 15-20 points for the past four days .The volumes are also low which shows accumlation .Once the stock is able to trade above 545 then it may see explosive moves which can take it to 600 and 620 .It has strong support at 500.
Voltas and godrej Industries have also seem to come out of woods.

Power of Chart Analysis

We posted earlier on our blog about the chart patterns of Orchid Chemical, Lupin, Bio Con, TaTa Chemiclas , Arvind and Nagarjuna Construnction.
The bottoming out patterns were there and once Nifty was able to take the key resistance level of 6070 there was no looking back for these stocks.
We were early to identify the pattern and once market support was there these stocks out performed. Therefore, one need to identify the chart patterns , identify low risk entry areas and then wait for the things to fold out .

Happy New Year

Wish you  all a very happy new year 2011.